Datatec profits halve in 2010

Declining sales at its key business units, networking distributor Westcon and systems integrator Logicalis.

Declining sales at its key business units, networking distributor Westcon and systems integrator Logicalis, knocked back total 2010 revenues at Datatec by 10% to $3.74bn (£2.56bn), while net profits effectively halved, down 47.2% to $31.6m as the group was hit by the toughest recession in living memory.

In its full-year results statement, Datatec said all its divisions had now returned to growth, with an upturn in the second half of its financial 2010, which closed at the end of February, marked as the "inflection point" by CEO Jens Montanana.

Both sales and profits improved sequentially and comparatively across the last six months of the year, Datatec said, as it reaped the rewards from an overall economic improvement and higher operational gearing after the firm took a hatchet to its cost base.

The strongest recovery was seen in data, voice, IP video, security, storage and virtualisation, it said.

Westcon, which accounts for 69% of the group's worldwide revenues, made sales of $2.6bn - down 7% on 2009. However, the distie slashed costs by 12% during the year and posted increased operating profit and margins.

Logicalis, which makes 22% of Datatec sales, booked revenues of $838.5m, down 16% year-on-year, but also saw growth in its operating profits after cutting a swathe through its expenses. As expected the unit saw product sales continue to drop off, with sales of its key vendor partners Cisco, HP and IBM seeing double-digit declines. Services revenues were flat, and annuity sales gave cause for celebration, rising 17%.

"Our rapid reaction  to the recent global crisis resulted in significant cost reductions being initiated over a year ago. This enabled us to lower our cost base and consequently maintain margins even as our revenues fell," said Montanana.

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